Last week, news broke that the small island country of Cyprus was considering enacting a tax on the wealth stored in all bank accounts as a means of enticing the European Union to bail out its failing banking sector. The original proposal from the European Union called for a tax of 9.9% on all bank accounts larger than €100,000 and 6.75% on all accounts smaller than that. The response was immediate and predictable. Cypriots took to the street in protest, an outpouring that ultimately led to the rejection of the taxes in the Cypriot parliament. The methods by which the bankrupt country will orchestrate and pay for the EU bailout still remains to be seen.
Political commentators in the media immediately began asking the question “Could this ever happen here?”, with the assumption that this type of tax on bank accounts to fund a government program amounted to nothing more than theft. This assumption, I believe, is correct; but it misses the forest for the trees. While it is clear that forcibly extracting a certain percentage of one’s wealth from their bank account is an act of theft, what is it about this tax that is more morally dubious than any other type of tax? There is nothing inherently different between the ‘outrageous’ Cypriot bank tax and our accepted and glorified progressive income tax, for example. In both cases, the government believes it has the right to your money (ie. your property); that it has the authority and the power to extract whatever amount it deems necessary (or at least, politically viable). The only real difference between the two (and it is not a meaningful one), is the point at which the theft occurs: before it hits your bank account or after it hits your bank account.
While the outrage over the bank tax proposal was completely justifiable, identifying it as a tax that amounts to theft while not also calling all forms of taxation theft is completely inconsistent. The intellectual debate over the morality of taxes should not start with the confiscation of bank deposits. Along with the governments of many developed countries, it is the concept of taxation itself that is morally bankrupt and in need of outrage and protest. While the Cypriot bank tax seems to have been taken off the table, the fact that it was even considered indicates the perceived scope of government power: limitless. So long as the government thinks it will get away with something it will do it, constitutional restraints be damned. Luckily in this case, it was not something that it could get away with.
Economic Enlightenment 